Corporate malfeasance of the highest order

Goyal Financials India flouts SEBI takeover norms by selling stake internally; the company has failed to submit notices and annual reports to members since 2005

The management of a little-known company, Goyal Financials India Ltd, apparently changed hands in 2008, with promoter and previous managing director Arun Goyal selling his stake in the company to present managing director Sanjay Savani. This act has been carried out without complying with SEBI takeover regulations and without providing any exit opportunity for other shareholders.

Trading in the company’s scrip on the BSE has been suspended since 2001.
The company, now rechristened as M/s GFL Financials (India) Ltd, has not sent annual reports or notices of any general body meetings to its shareholders since 2005. The company auditor, Mehul and Associates, has been turning a blind eye to the deplorable standards of corporate governance maintained by the company.

It has effectively given false certificate of corporate governance for the past three years. To top it all, the company’s 2007 annual report was signed by an individual as director of the firm, when actually she had resigned from the post much earlier.

The new management has also passed void resolutions to shift the registered office of the company from Madhya Pradesh to Daman without giving notice of EGM held on 15 May 2009. Apparently, the result of a postal ballot filed with the BSE and Registrar for shifting the office is also a doctored one.

A complaint has been filed with SEBI seeking its intervention and investigation into the company’s affairs. — Sanket Dhanorkar

 

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Office rents are falling in Tier I cities

After witnessing astronomically high premiums, office rents in central business districts (CBDs) of all major Tier I cities are falling and there are some offices available on rent for as low as Rs20 per sq ft, said property dealers.

“The total market revival across the key real estate market, marked by increasing absorption and reducing vacancy is likely to be achieved by the second quarter of FY10 for most Indian cities,” said Anshul Jain, chief executive, DTZ International Property.

The supply in the office space arena is increasing and the demand is suppressed. The slowdown has also contributed to the availability of office space as companies started retrenching staff and reorganising their resources, resulting in additional office space being available with such firms.

According to a report by DTZ, the CBD in Delhi, including the National Capital Region (NCR), has around 52 million sq ft (msf) of office space, out of which 41% is vacant. Similarly, in Mumbai’s CBD out of the total 48 msf, 29% is vacant, while in Bengaluru 23% out of 76 msf office space remains vacant. Kolkata has 13 msf office space, out of which 16% is vacant. Pune and Chennai, with an office space of 36 msf and 38 msf respectively, have the percentage of vacant space at 34% and 36% respectively, the report said.

Even the rates for many Information Technology (IT) parks have fallen drastically. “Old Mahabalipuram Road (OMR), the famous IT corridor in Chennai, quotes a lease rent of Rs20 per sq ft. The rates can’t go lower than this and also won’t increase in the next seven months,” said Sorabh K Jain, principal, Sun Apollo Real Estate Advisors Pvt Ltd.

According to industry sources, the IT Parks at OMR are leasing the space for ceremonies like marriages to earn some money till they can rent it to some tenant. The irony is, during the boom time in 2007, the same location used to attract rents as high as Rs7,500 per sq ft.

In Mumbai too, office rents have fallen and many institutions located at main business areas like Nariman Point are looking at shifting to other places where the rent is lower. Many of these institutions are planning to move to suburban areas instead of paying rents as high as Rs300 per sq ft for Nariman Point properties. Recently, SBI Life Insurance Ltd took about 50% office space in Andheri-based office complex Rustomjee Natraj for Rs80 per sq ft. Earlier, the same office complex developed by the Keystone group used to attract office rent of around Rs140 per sq ft.

Despite falling office rentals, some overseas property investors are planning to invest in these CBDs. Property investment and development group Hongkong Land Ltd, a $12 million company is planning to invest $500,000 in Tier I cities. 
— Pallabika Ganguly
 

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3G, rural penetration to catalyse PE investments in telecom: Survey

According to a survey, mobile VAS, mobile broadband and telecom software companies, as well as companies providing services to telecom companies, are among the favourite sectors for PE & VC investors within the industry

Research firm Venture Intelligence has said that almost 70% of the private equity (PE) and venture capital (VC) investors feel that Indian telecom operators would be able to find and profitably serve the next 100 million mobile consumers from rural areas.

A majority of investors are also willing to bet that the introduction of 3G services can be a game changer for various players in Indian telecom, Venture Intelligence said in a survey of fund managers from over 50 PE & VC firms.

"In recent months, intense and rising competition levels, declining average revenues per user (ARPUs), high costs of 3G licenses and the impending introduction of mobile number portability (MNP), have placed significant challenges before the industry," said Arun Natarajan, chief executive, Venture Intelligence.

"At the same time, as the report reveals, investors feel the introduction of 3G and the increased emphasis by mobile operators on locally-relevant applications to enhance their ARPUs, will present investors with several interesting opportunities," he added.

While the appetite for investments in mobile operators is still high, PE & VC investors who have invested over $5 billion in telecom services and related companies over the past five years, are also actively scanning for 'downstream' opportunities including mobile value-added services (VAS), telecom software and investments in other service providers to telecom companies, the report said.
In a special article for the report, an expert from KPMG points out the various opportunities and challenges ahead for PE investments across various segments within the telecom sector. While the industry will continue to provide attractive returns that PE investors seek, the landscape is likely to remain dynamic and somewhat uncertain over the foreseeable future from the market, regulatory and industry perspective, KPMG feels.

Experts from Deloitte insist in their article that 3G has great potential to alter the dynamics of the Indian telecom market. Besides the expected adoption in the metros, the poor infrastructure on the fixed line side means that an increasing number of consumers are going to rely on their mobile phones for data-driven services, leading to a massive uptake as and when the infrastructure becomes available.

Mobile Value-Added Services (VAS) companies, who have so far been struggling in the shadows of the largely voice-focused mobile operators, are looking forward keenly to the advent of 3G which promises an opportunity to enhance their revenues through new types of services. TC Meenakshisundaram of IDG Ventures India, after analysing the emerging scenario, predicts that VAS will get its rightful priority in the operators' focus to maintain or increase their ARPU and profitability.
 

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